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Scotland bans Covid-19 support to firms based in tax havens

The Scottish parliament has voted to block companies based in tax havens from using millions of pounds in coronavirus relief funding, in emergency legislation.

MSPs approved measures on Wednesday night brokered by the Scottish Greens to prohibit firms or individuals who are registered in tax havens, or are a subsidiary of an offshore company, from getting support grants.

The vote follows similar decisions by the Welsh government last week and by other EU member states, including Denmark and France, but ministers have yet to say how much Scottish government spending will be affected or how it will be enforced.

It is thought it could prevent companies with offshore links from applying to a new £120m enterprise resilience fund that provides grants for small- and medium-sized firms, and a £30m creative, tourism and hospitality bailout fund for firms that cannot get business rates relief.

The measures, which were also backed by the Conservatives, were supported by the Scottish National party after ministers asked for them to be restricted to grants instead of including loans after advice from government lawyers.

Patrick Harvie, the Scottish Green party co-leader, said: “Any company which avoids its responsibility to contribute to society should not be getting handouts when things go wrong. That’s why many European nations and Wales have already made this commitment.

“I’m delighted that ministers finally saw sense on this basic issue of fairness. This move isn’t the final word, but it marks the beginning of a new approach to tackling the companies which shamelessly avoid paying tax, and we will continue to build on what’s been achieved today.”

In other measures, MSPs were given extra powers to: take over badly run care homes where there was a threat to life; give £19.2m extra for carers; and, in a surprise defeat for the government, extend the life of pop-up cycle lanes and wider pavements to support physical distancing measures.

However, the SNP voted with the Tories against measures to freeze rents for two years to protect those on low wages or in arrears during the post-pandemic economic recovery.

Nicola Sturgeon, the first minister, said the Scottish Green proposals were flawed and could have unintended consequences.

The tax haven vote will renew the focus on the Scottish government’s use of offshore companies, which are set up legally in the UK and pay all the taxes they are expected to pay, in other situations.

An investigation by the Guardian and the Ferret website in 2018 found that companies based in the Channel Islands, Dubai and the Cayman Islands had substantial stakes in 47 private finance schemes to build Scottish motorways, schools, hospitals and colleges.

The analyst Dexter Whitfield found that offshore firms and investors were involved in about 60% of those Scottish government-backed schemes, which will cost £2.7bn to build but will cost taxpayers nearly £8bn in total once the borrowing, interest, management fees and running costs are paid off.

The Welsh government blocked companies with headquarters in a tax haven from accessing its £500m economic resilience fund on 15 May. Ministers in Cardiff said last week it would affect a small number of companies.

Rebecca Evans, the Welsh finance minister, said: “We have put in place the most generous business support package in the whole of the UK. It is only right that businesses which are not contributing tax payments to our economy should not benefit from this scheme.”